All work has been halted as an investigation is launched into the collapse of Christchurch's Copthorne Hotel which had workers running for their lives yesterday.

The 10-storey hotel in Colombo St "pancaked" during demolition work in Christchurch's CBD at 1.25pm. No one was injured but witnesses said demolition workers ran for their lives as the hotel, opposite Victoria Square, collapsed.

The Ministry of Business, Innovation and Employment issued an immediate prohibition notice to stop all work on the site until a new engineer's report comes out, and is starting an investigation.

Witness Craig Crew said a nibbler was working about six floors up, eating at a vertical beam at the eastern side of the building when the front veranda fell. "Next thing, the entire building pancaked on itself," he said.

Jill Ineson was on a bike ride around central Christchurch when she saw the Copthorne fall.

"It happened so quickly. The middle of the building just imploded like a house of cards. There was a massive cloud of dust and you have a sick feeling in your gut and you hope that none of the guys were stuck in that.

"It was a bit like a massive earthquake. The ground shook. All these ghastly feelings rush into your head.

"After the dust settled, the contractors started to creep around looking pretty ashen-faced."

The building was being demolished by Southern Demolition and Salvage. The building's owner had refused offers of help with the demolition from the Canterbury Earthquake Recovery Authority.

Southern Demolition and Salvage owner Alan Edge said: "At the time of the incident, we were down on level four taking it apart. The operator [of the nibbler] noticed some untoward things and backed the machine away. And then the incident occurred.

"I think it's just the stress of the earthquakes on Christchurch buildings," he said.

He wanted to wait for the engineering report to come out before making any further comments.

The 142-room Copthorne, built in 1974 as the Ramada Inn, was evacuated after the February 2011 earthquake and never reopened.